Question

If diminishing marginal returns have already set in for​ Danica's Dog Training Emporium and the marginal product of the fifth dog trainer is​ 18, then the marginal product of the fourth dog trainer must be:

A) negative.
B) zero.
C) less than 18.
D) greater than 18.

Answer 1

D) greater than 18.

Step-by-step explanation:

The marginal product of the fourth dog trainer at Danica's Dog Training Emporium must be greater than 18, because otherwise, a fifth dog trainer, whose marginal product is specified to be 18, would not have been hired.

This is because marginal product is subject to the property of diminishing marginal returns, which establishes that for each additonal unit of labor hired, the additional output produced is less. For example, the first dog trainer at Danica's had to have a marginal product a lot greater than 18, the second dog trainer a bit less, the third trainer a bit less, and so on.

Firms hire up to the point where marginal product of labor equals the marginal cost of hiring.